How Obama and Democrats Bamboozled Young Voters With A “Ponzi Scheme”

By Alex Gonzalez

House Minority Leader Nancy Pelosi (D-CA) is strongly against raising the Medicare eligibility age and said that such a proposal was unlikely to be part of a final “fiscal cliff” deal.  Sen. Durbin (D-IL) shared similar views last Sunday by suggesting that Medicare and “Social Security does not add one penny to our debt — not a penny”.  Likewise, Sen. Durbin (D-IL) also argued that age requirement need to be off the “fiscal cliff “negotiations because what  “happens to the early retiree who needs health insurance before that person’s eligible for Medicare. In other words, Democrats refuse to cut spending on Entitlements, which are the main drivers of the deficit and national debt.

Conversely, while 60 percent of voters ages of 18 to 29 voted for Obama, young voters are still stuck with an antiquated government system that “transfers”  funds from payroll taxes into unfunded Medicare, and Social Security payments, programs that will not be there for the millennia generation and Americans in their 20s. Moreover, while Obama did sign a bill to reduce college loan payments, the $6 billion annual budget for college loans, it does not match the almost $2 trillion of government programs pay in entitlements. Consequently, young voters are being given crams in the form of student loans, but they are being bamboozled with their payroll taxes because young Americans are paying into “ponzi scheme.”

A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk—US Securities and Exchange Commission

And Democrats are well aware of this “ponzi scheme”, like Rick Perry called Social Security, but they want to avoid cutting entitlement programs and raise age-requirement only because they are being bullied by lobbing groups like AARP that strongly oppose any changes to the current Medicare and Social security programs.

Study after study shows the problem with budget is that we spend too much on Medicare and Social Security, but AARP, the highly influential lobby for older Americans, is fiercely opposing any Medicare or Social Security cuts and emphasizes that it is fighting for the good of its members.  “AARP has long played a dual role. It advocates for the interests of seniors, and it makes money allowing its name to be used in selling them private insurance, including coverage known as ­Medigap, which supplements government-provided Medicare. The group gets a 4.95 percent royalty each time someone buys Medigap insurance with the AARP brand. ” And according to  Kaiser Family report, The Medigap insurance policies bring in hundreds of millions of dollars a year and are among an array of AARP-endorsed products that generate slightly more than half of the group’s $1.4 billion in revenue.

Unfortunately, while AARP flexes its political muscle and bully Democrats into a leave-my-entitlements-alone, young Americans–those who voted for Obama–continue to transfer their payroll taxes into programs that will be depleted in the next 20 years. For example, as Michael Barone of the American Enterprise Institute argues;

Perhaps even more surprising, federal transfer payments have done much more to increase income inequality than federal taxes. That’s because, in Ryan’s words, “The distribution of government transfers has moved away from households in the lower part of the income scale. For instance, in 1979, households in the lowest income quintile received 54 percent of all transfer payments. In 2007, those households received just 36 percent of transfers.” In effect, Social Security and Medicare have been transferring money from low earning young people (who don’t pay income tax but are hit by the payroll tax) to increasingly affluent old people.  

In other words, the transferred of wealth” from young Millennia–and Americans in their 20s–has exacerbated income inequality between the young and the old and Democrats in the Senate and House want to keep these same programs that directly affect young workers; which is the main reason why AARP supports Obamacare while opposing any changes to the current entitlements programs—give access to cheap health insurance but don’t cut entitlement to seniors.

In addition, Economist Samuel Roberson from the Washington Post argues that “Supporting retirees is now the federal government’s main activity. There’s a huge redistribution from young to old — a redistribution that will be made worse if retiree programs are largely excluded from deficit reduction, as many liberal groups urge.”

But Obama refuses to compromise on cuts to this “transfer of wealth” from “young to old” while knowing that these programs will be depleted within a generation, and therefore, not in place for all those millions of young Americans in their 20s who voted for him.

As the Pew Center pointed out, young voters supported Obama with 60% over Mitt Romney 36%–a 24 point gap.  Hoverer, Obama has avoided telling young voters the fact that entitlements directly burdens young workers. Obama and the Democrats did help young voters with a new law that makes it easier for students to pay back their federal college loans by 2014.  But the average balance is $26,600 per student and 66% of students come out college with a debt.  Obama’s proposal to lower student loan debt centers on the income-based repayment plan (IBR) IBR allowed college graduates to spend just 15% of non-discretionary income on student loan repayment. President Obama amended the program in 2010 so that graduates spend only 10% of non-discretionary income on loan repayment.

But a study by the New America Foundation show that under the new IRB rules there is no extra cost in borrowing an additional dollar after a student loan debts exceed $60,000, regardless of salary. But those with A borrower with an MBA or a law degree can easily have a six-figure loan balance forgiven, even if his income exceeds $100,000 for much of his repayment term, according to study.  In essences, the loan college program only favors very few with high advance degrees but does nothing to pay for students loans, it only lowered and extended the payment methods.

Therefore, $6 billion in college loans does nothing for young Americans since  young voters still have to pay into payroll taxes to fund Social Security and Medicare, which  been transferring money from low earning young people who pay low income tax but are hit by the payroll tax to increasingly affluent old people.  Moreover, a compromise for student loans estimated only at $6 billion annually while the unfunded liabilities for Medicare and Social Security are almost $2 trillion. Hence, while 60 percent of young voters supported Obama in this past election, the policies; sponsored and currently protected by Democrats in Congress merely gave the impression that Democrats are helping young votes, or young Americans, but in reality young voters, college students, and young Americans are been bamboozled since current system indeed “transfer wealth” from young Americans to seniors and groups like AARP.  Young people vote for a “ponzi scheme” in which where Democrats are promising that their ‘investment” (payroll taxes) money is safe for their retirement.

Alex Gonzalez  is a political Analyst and Political Director for Latinos Ready To Vote!  He received a Bachelors Degree and a Masters’ Degree, with emphasis in American politics,  from San Fransisco State University.
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